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The Impact of Sulfur Limits on Fuel Demand and Electricity Prices in Britain

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  • David M. Newbery

Abstract

By the year 1996, about one-quarter of Britain's electricity will be generated from gas, compared to zero in 1992, displacing coal. This switch is required by 2000 to meet the EC and UN mandated sulfur emissions limits, but was advanced by the imperfect market created by privatisation. This paper examines the economics of Flue Gas Desulfurisation, and argues that without the right to trade emissions permits, FGD may run at only 17% load because of premature investment in gas generation. Tradable permits have a large impact on profits for the generators and British Coal. At present the pool fails to schedule plant on avoidable cost, and electricity prices are likely to be set by the price of gas, not the emissions limits, though gas prices may rise with tighter future limits.

Suggested Citation

  • David M. Newbery, 1994. "The Impact of Sulfur Limits on Fuel Demand and Electricity Prices in Britain," The Energy Journal, International Association for Energy Economics, vol. 0(Number 3), pages 19-41.
    • Handle: RePEc:aen:journl:1994v15-03-a02
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    Cited by:

    1. Patrik Söderholm, 2000. "Environmental Regulations and Interfuel Substitution in the Power Sector: A Generalized Leontief Model," Energy & Environment, , vol. 11(1), pages 1-23, January.
    2. Kahn, Edward, 1998. "Introducing competition to the electricity industry in Spain: the role of initial conditions," Utilities Policy, Elsevier, vol. 7(1), pages 15-22, March.
    3. Fouquet, Roger, 2012. "The demand for environmental quality in driving transitions to low-polluting energy sources," Energy Policy, Elsevier, vol. 50(C), pages 138-149.
    4. Roger Fouquet, 2012. "Economics of Energy and Climate Change: Origins, Developments and Growth," Working Papers 2012-08, BC3.
    5. Green, Richard, 1999. "Draining the Pool: the reform of electricity trading in England and Wales," Energy Policy, Elsevier, vol. 27(9), pages 515-525, September.

    More about this item

    JEL classification:

    • F0 - International Economics - - General

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